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Bank of America Short Sale Deficiency Policy Change?

Has mortgage servicing behemoth Bank of America clearly defined their policy on how they handle the short sale deficiency? When a short sale is complete, the loss the bank experiences, also known as the short sale deficiency, has always been a very dicey subject. "What happens to the difference?" is the most common question a borrower asks prior to attempting a short sale. And for good reason, because it can mean the difference between owing tens of thousands of dollars and owing zero. Big difference.

For a more detailed understanding of this concept, review the following article on the subject, "Is a Short Sale Better Than a Foreclosures?" Jack Schakett, Bank of America senior vice president for credit loss and mitigation strategies, said this week that if a borrower proves he can no longer pay the mortgage and has few or no assets, the bank will waive its right to a deficiency judgment during the closing of a short sale. However, if someone can afford to pay or has assets, the bank will try to negotiate a set fee for the borrower to pay at closing or ask the borrower to sign a partial or full note. And in the event the borrower refuses to turn over financial information, Bank of America will retain its right to go after the money. "We want to help customers who legitimately can't afford to make payments, but we don't want the ones who have a bunch of money to just be able to walk away," Schakett said. "They have to share some of our pain." Schakett, who spoke Thursday at a National Association of Real Estate Editors conference, said the change is part of a new approach to short sales. "Customers would like to know if they do a short sale deal, are they done or not," he said. "It's best for both of us." Is this really a policy change? Let's look at Jack's comments a bit closer. First of all, how is "few or no assets" defined? Bank of America hasn't released that ultra-important definition. Secondly, what does "has assets" look like? The lack of detail plays into Bank of America's favor because it gives BoA the ability to enforce a deficiency requirement on basically any short sale request they want. Third, Bank of America has historically not even accepted a short sale offer unless the borrower's financial information was also submitted. Therefore, this so called "policy change" sounds like the same ol', same ol'. What are the best practices for avoiding being held responsible for the difference created from a short sale? If you are a borrower considering or currently in the short sale process, listen up! First, being stuck with a deficiency is NOT automatic, it can be negotiated. The key is to work with a highly trained, expert short sale specialist. This person needs to be an investor, someone who is going to buy the property directly from you. If you work with a real estate agent who is listing the property, their hands will be tied and they are more unlikely to have the negotiating flexibility necessary to fight the deficiency. As a licensed real estate, by recommending you work with an investor, I am NOT dogging agents in the short sale process. It's not their fault. Their hands are tied in the process. You need to work with a person who is the buyer so that they can negotiate directly with the lender's short sale department to find a middle ground. Experienced investors have numerous tools and strategies that very few people know about that can all play a role in getting the bank to not hold the borrower responsible for the difference. Where do you find these people? Our organization has the largest and the most experienced network of highly trained, expert short sale specialists in America. Leave a comment below and we'll get you in contact with one of our people closest to you. I'm also interested to hear your comments on my position that Bank of America hasn't really changed anything with this latest announcement. Your thoughts?